Russia's Novatek now a world player with Yamal LNG

Company starts production at an Arctic gas facility that could face some geographical challenges.
By Daniel J. Graeber  |  Dec. 5, 2017 at 8:05 AM
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Dec. 5 (UPI) -- Russian energy company Novatek said a new era for one of the world's largest gas suppliers has begun with the start of LNG operations on the Yamal Peninsula.

Novatek said production of liquefied natural gas started at the Arctic facility, which has a design capacity of about 5.5 million tons of LNG per year. The first cargo for delivery is already scheduled for Friday.

"This event marks a milestone accomplishment for the Yamal LNG project," Novatek Chairman Leonid Mikhelson said in a statement. "The commencement of LNG production begins a new chapter in our corporate history."

Novatek, one of the largest gas producers in Russia, apart from Gazprom, signed a memorandum of understanding with the China Development Bank to cooperate on steering capital toward LNG in November. Novatek leads the project aimed at sourcing the markets in the Asia-Pacific, alongside French energy company Total and the China National Petroleum Corp.

Separately, the company signed a strategic cooperation agreement with CNPC, its partner at Yamal, that outlines implementation of a second Arctic LNG project, including the development of infrastructure and trading mechanisms.

Energy consultant group Wood Mackenzie said it's rare for a project like Yamal to get off the ground on time and on budget. With deliveries already scheduled, Novatek moves from the largest independent gas company in Russia to a global player.

Nevertheless, Samuel Lussac, Wood Mackenzie's senior Russian analyst, said operations will be tested, in part by its location.

"The plant's first operating months will show whether the plant can operate smoothly in the harsh Arctic environment," he said in comments emailed to UPI. "Also, the Northern Sea Route transportation is in its early stages of development, and its feasibility as a major LNG delivery route is unclear."

LNG offers more options for delivery because there are fewer geopolitical risks than piped gas. European economies are vulnerable to those types of risk because most of the Russian gas they get moves through Soviet-era pipelines in Ukraine.

Total CEO Patrick Pouyanne joined Russian Cabinet officials in June for a ceremony naming a tanker designated for Arctic LNG after former Total CEO Christophe de Margerie, who died in a plane crash in Moscow in 2014.

The Christophe de Margerie vessel is designated for around-the-clock transportation of LNG from port facilities in the far-north Kara Sea tied to Russia's gas facility at the Yamal Peninsula.

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